Name & Address of party written to
Dear Sir or Madam:
We are the holder of your Guaranty of the debts and obligations of _____________ (Name of Person) whose debts are being Guaranteed (“Debtor”) to us in the amount of $_____________________, a copy of which is enclosed.
The Debtor has defaulted in payment to us. In accordance with the terms of the Guaranty, we hereby demand payment in full of the outstanding debt in the amount $_________________________, together with interest thereon at the rate of ___ Interest as provided for in the Agreement, from this date forward.
We are sorry the matter has reached this stage but find no alternative since we are unable to collect these funds from the debtor. We would be delighted to consider working out a payment plan if you, and with your persuasive powers with the debtor, need to do so separately or together.
Please note that while we would like to discuss this matter with you in depth we are obligated by law to inform you any information received will be used to collect this debt.
As you undoubtedly know, the attached guarantee provides for our being able to collect our legal and collection costs in this matter. Therefore, it is in your interest to pay us immediately, cause us to be paid by the original debtor, or work out a solid payment plan immediately.
Please contact us immediately to advise us of whether you will pay the demand in full or request another payment plan. If we do not hear from you in 15 days, we will be forced to place this for collection in the first of several steps to reduce this debt to a Court Judgment to be enforced against the original debtor and yourself.
You can reach us at the above number on the letterhead.
Yours very truly,
Authorized Employee or Individual
cc Original Debtor or Debtors
Guarantor, Trying to Collect from
This review list is provided to inform you about this document and assist you in its preparation. Collecting money is more a sales function than anything else. This is especially true in your first contact with the “other side.” In this case, this is the first direct letter to the Guarantor, giving them the bad news that they may have to come through and pay the debt for the party they guaranteed if for.
Since you only have one chance to make a first impression, it is important to use it wisely here. You have substantial legal leverage with a guarantee to back up any threats you wish to make later. On your first contact, however, we strongly recommend you try to encourage payment as opposed to launch a hardball attack on the other side. First, the Guarantor will be mad at the nonpaying debtor. You can use that to your advantage and encourage them to help you collect the debt from the debtor so they do not have to do so.
The best way to achieve this is to get this initial letter out early in the collection process. In other words, get the letter out to the guarantor before the debt is very late and while small payments can bring it current and possibly get it reinstated, depending on your circumstances and the credit standards of your company, or yourself personally.
Another reason for a more friendly approach is that collection agents and lawyers have pursued debts more vigorously in the last decade than ever before, with a more varied approach and with hardball tactics. Debtors have been worn down by the process and are quick to seek bankruptcy protection, as the increasingly caseload shows. You don’t want to drive them there and you don’t want them to be immediately in that total adversary position with you. We recommend you initially try to get them back on a paying basis.
1. Be sure you include the legal warning that all information received will be used to collect a debt. Be sure to orally advise them if you speak with them.
2. Sign the letter and mark 21 days off to send a second demand letter (21 days provides a little extra time for the mail and delays).
3. We recommend the person handling the matter sign the letter personally and include a direct phone line and extension as applicable. The personal touch gets money in the door, in our experience, as well as being a politer way of operating.
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